A Conversation with Adolfo Hernandez

In March 2016, Adolfo Hernandez took the helm as the new Chief Executive of SDL. Now, about a year-and-a-half later, he joins us to share his unique perspective on where the language industry is today—and where he sees it headed in the future.

Transcript

A rising tide lifts all boats. Some people claim that real competition only comes from outside of an industry. Because when an established industry grows, all the players grow together.

Michael

Today we talk with the CEO of SDL. SDL as a company touches every player in our space by providing the technologies that are the fuel that allow the translation industries to run; for translators to do their work; for LSPs to process files; and ultimately for clients to get the projects back to them.

So in short, if SDL grows, it means everybody’s growing, so let’s listen to this interview.

Adolfo

I’m Adolfo Hernandez. I’m the Chief Executive of SDL. I’ve been in the company since March 2016.

Renato

So, it’s about a year and a half that you’ve been in this position, and one of the things that interests me in knowing is that you are, even though you have been a buyer of localization services in your previous positions, you are an outsider to our language service provider space. What is your first impression of the localization industry?

Adolfo

Well, I’m not sure I can talk about first impressions now after nearly 18 months in, but certainly, when I was really fresh in, there were a couple of ideas that were very pervasive. Number one was, it was still very manual technology. I saw as an industry, we were very dependent on humans and not using technology enough, but I just thought, you know, having seen what I’ve seen in other industries for the past 20 years, you can get a lot of value by combining good use of technology for the more repetitive tasks and then using humans for the most high-value tasks. I felt we were still using a lot of humans for things that, in other industries, software has addressed successfully. That was the first observation.

The second observation was that there was a lot of people who knew each other for a long time in this industry. If you are in other sectors of the software industry, you might have bumped into people over the years by people moving in and out of these ideation industries, and you meet new people. Collectively in the localization industry kept more people, basically, for longer.

And the third thing that was really pervasive was how interesting this industry is. There’s a very complex value chain that goes all the way from big providers, big multi-nationals, down to medium-sized multi-nationals and the LSP side; then you’ve got the customer side on localization directors. Then you’ve got medium-sized LSPs all the way down to freelance companies, agencies, I mean, the bevy of freelancers. So if you want to be successful in this industry, you have plenty of opportunity because there is a big audience—so very excited to be part of this industry.

Michael

So the three observations Adolfo noticed while being new to the industry was, first, there’s still a lot of manual process. Second, that it is functionally a cottage industry, and third, that the value chain is a complex one.

Renato

So, one of the things that outsiders, when they come into our industry, they get excited, it’s very fragmented, as you just described, it’s global, it’s a huge opportunity for consolidation. Did you have that thought when you came in?

Adolfo

Yeah, of course. I guess that’s a level two observation. The first one is coming into an industry as a whole, that’s what I answered before. Coming in, as an executive into this industry, one does get the distinct impression that there is opportunity, not only to transform companies, individually, but also to go beyond that and maybe start shaping this industry, and I think there is going to be opportunities in the future to sort of change some of the dynamics, some of the configurations of players, the fragmentation of vendors, the use of technology, so I think this industry will look radically different in ten years than it does today and, obviously, I guess as a business leader, it’s a great opportunity to be part of it.

Michael

And Adolfo, that’s interesting that you say that because much of what has shaped this industry are technologies that SDL has either created or bought. Would you see, as your goal, to remain innovative, which is a word that we don’t necessarily like, but true, but also retain being the standard?

Adolfo

Well, I think, first of all, I think you’re absolutely right whether it’s through technology on the TMS front, or the Trados front, or like other things in the content management side. I think we’ve played a big role in the automation of this industry, but if you look at the art of the possible today and you look forward, there is a lot more that can be done, and there is a lot more that should be done, and there is a lot more that will be done.

My commitment as Chief Executive of SDL is to keep SDL at the forefront of this innovation and to build the next releases of technology stacks that are going to power this industry for the next five to ten years. So, we’re going to have to look at how do we evolve the translator for the TVT so that it works better for the new life of translators and the new configurations of translators to make better use of the opportunities in the cloud. We’ve got to look at much better project management capabilities, automation flows from the work-giver to the work-doer. Much better real-time analytics, and I think if there is a company out there that has the DNA, the history, the install base, and the resources to make it happen, I think it’s SDL, and I will make sure it has the financial whereabouts to continue investing and bringing this innovation forward.

Renato

One of the areas where SDL has invested in the past was trying to reinvent itself as a customer experience company, and one of the first things that you did after joining the company was divesting some of this technology that had been brought in by the company. Is this one of those ‘okay we tried this way, it didn’t work; we’re going into a different direction’? What drove that decision to refocus SDL?

Adolfo

I didn’t want to play a role of followership in another industry when we could play the role of leadership in the content globalization industry, and, you know, admittedly, we kind of fell asleep at the wheel a few years ago, and I think we started creating many opportunities for our competitors to grow, but the opportunities around helping enterprises taking the content globally are huge—are huge in the creation of content, management of content, translation of content, publication of that content. I just felt, with the board, that we have plenty to be doing in that market, that there was enough to create a healthy, fast-growing business to attract a lot of talent, and we should just double down on that, and then there were other assets that were great, absolutely great, but they were not great for the SDL that we were trying to build.

Renato

So, one of the challenges, I think, for you, and I would love to hear how you are addressing this, is that SDL is a little bit that company that everybody loves to hate; you have a side of technology that, as Michael mentioned, it’s essentially the standard, the de facto standard in the industry, and on the other side you have services, so certain players, less mature players would always say why should I be buying from my competitor, and that drove some technologies to be developed in this space. How do you handle this dichotomy?

Adolfo

Well, to be quite honest, I guess I don’t have the history or the heritage of the love and hate and that might exist in this industry for my company or for others. I have been quite happy to sit with most of the chief executives of our competitors and discuss with them how we can do business together. I think we have been, for all of our faults, the one thing that people cannot complain, has been our ethical behavior. So, when we engage with an LSP, when we engage with agencies, when we engage with translators, we have significant walls that separate our businesses, so there’s never been any switch selling or anything. So, I believe that we’re starting from a solid base.

Going forward, I would like to make sure that when we bring innovation out, the value is so good and the value proposition is so compelling that most of the people out there who could use these, other LSPs, they would say, ‘well, I could try to build it myself, but it’s going to cost me time and money, and I’ve got to find the talent or I can use SDL’s, and provide that they guarantee me that they’re going to be professional about it and have the right safety and mechanisms in place and assurances, and I believe over time as this gets more complicated, as this becomes more capital-intensive, and software dominates more and more of what we do, I think a lot of people are going to need a partner to work with. And I would like to make sure that we do everything we can as a company to be that humble, valued and trustable partner that other LSPs can come and do business with.

Michael

One thing that I wanted to highlight that you said a little bit further back was when you were talking about the industry-leading technology that you all have had over the years. You started by talking about what the translator wants, and in this last section you talked about meeting with LSPs, and I’m certain you’re meeting with buyers of localization tools and services. It’s a very complex position that you all are in, you’re serving, you have a big constituency that you’re serving, and just that awareness I think is good, and to try to ethically deliver to all those people is wonderful.

Adolfo

Yes, it’s definitely interesting, as you say, but I think it’s going to become easier over time, and let me just explain that. I think, traditionally, the solutions were way too disconnected from one another, i.e., what we were in the MT space was very disconnected from what we were doing in the Trados Studio space, and we were very disconnected with what we were doing with the translation management space, and it was disconnected again from what we were doing in content management. Progressively, we are bringing these solutions closer together and use for the first time with adaptive MT integration into Trados.

You’ve seen the announcements of SDL’s enterprise translation server with neural MT. You’re going to be seeing a lot more of the technologies coming together and very soon sharing common components. They’re going to be sharing the same translation memory; they’re going to be sharing the same terminology server, so you’re going to see there’s going to technology convergence that is going to make this easier, and then there is going to be convergence on how these things get deployed and used and procured through the language cloud.

Renato

As you heard, convergence will bring the different elements of SDL technology together.

Adolfo

So, what you might think we’re addressing totally distinct segments of the market, these guys, these segments of the markets interact with each other, and ultimately every freelancer works for someone, and that someone needs to have a work-giving type solution, and then there are productivity tools that need to talk to one another. So as we complete the convergence over the next 12 to 18 months, I think you’ll find that it’s a more common set of solutions than what they are today and hence easier for us to develop.

Michael

So, what are the principles that unite these different groups? You’ve talked about the tools and some of the technology there, but what are you trying to achieve with that? Is it collaboration? What are some of the principles there?

Adolfo

So, for me, the biggest principle, I want to make it so easy for anybody who needs to tailor content global to work with SDL and use SDL technologies. That’s what we would like to achieve. At the technology level, you will achieve that if all of our technologies work together, integrate together, and kind of extend one another. It doesn’t mean that you have to use all of our technologies, but if you so choose, you will find that they really dovetail very well, that they integrate very well, that the handovers are well thought through, that the applications look like they integrate with each other, the user permission is carried across, that there is total reuse of linguistic assets.

And if you happen to be doing something on the content management side at the other end, the integration is fabulous, right. If you are a freelancer or a translator, and you only want to buy that side of the translation productivity—fantastic. Just use that one. If you are in an enterprise, and you want to use our enterprise translation server, go ahead, you don’t need to use the whole thing, but they need to come together like hand and glove.

Michael

Yeah, so I can see you address two of the three constituencies well there, and they seem to be unifying principles, but that principle of SDL being the easiest technology to use, that could be a bit of a challenge for LSPs who are competing on the services side, right?

Adolfo

Well, it would be, right, but I think the way I like to think about this is, I will make this technology and all technologies available to LSPs. Over time, I have a vision that we will be moving more and more of our services to be true tech-enabled services. I believe we have to keep a lot of high-value linguists. As you know, we probably are the ones with the largest amount of linguists in-house. I intend that to continue to grow, but I think every company has to find its magic sauce to get the value out of technology. I will make my technology available to someone else and let them come up with the magic sauce. The same as our services organization; it’s coming up with our own magic sauce to extend the value of this technology but, again, for me, the really important point is we’ve got to move away people from just doing manual repetitive work. Leave that to software and move people and linguists to high-touch, high-value services content, and I think that’s where the real profit for the industry will be.

Renato

I agree 100% with you. One of the challenges historically for our industry has been interoperability, and SDL as the de facto standard, as Microsoft for many years in the office suite space, has essentially dictated or determined how this space is driven, what is the direction it is going in and what standards need to be followed, and there used to be a lot of… I mean, we used to have a Standards Industry Association where Trados at the time was a big player, but essentially the role was to avoid that interoperability to happen. What’s your view on integration of different technologies in the systems that you provide?

Adolfo

Well, I think, in general, the standards are good, and we’re still a member of the standard bodies, and I know we are engaging to a standard body and to the house organization as well. I believe everyone is able to open our files. I think we’re pretty much using stuff that is pretty much standard today like XLIFF TBX and others. So, I don’t think this is a big issue nowadays. I understand that this has got a lot of emotion attached to this, but I don’t think it is as big as it used to be in the past.

Going forward, as I said, we’re going to be sharing some more of our technologies across products, and I know we’re engaging now in discussions with other people to sort of see how we get better integrations. I believe in openness. I believe in standards, so in principle, we’ll be supporting those unless it doesn’t make any business sense, but I haven’t been made aware of anything. Even in the old days, everybody could work with Trados files. I don’t think that’s going to be an issue.

Renato

I’m not an expert in this space. What I remember is people talking about segmentation rules and standardizing part of that, but I agree with you, and we’re, anyway, today we live in an API economy. How does SDL fit in that new reality?

Adolfo

Well, a very good point. I couldn’t agree more. I think we’re living in an API world, we’re living in an SDK world and, you know, I think you might recall that was one of the first initiatives that I launched when I arrived, was what we call the Connectors Program; so we’ve been doing a lot of Connectors in the last year. I think the latest count is about 48 of them, and most of them are working through our own APIs and/or tapping into third-parties’ APIs because, ideally, my vision and the one that we’re trying to deliver, and it doesn’t matter where customers’ content resides, which transactional system, which marketing system, CRM system. We want to be able to get to it, and get it processed, globalized and then put back in there and, by the way, also keep a taxonomy of what’s available where, in what language. So, we will continue to do that.

Beyond that, we’ve been working happily on putting more APIs into our technology, so people can work and extend our technology through that SDK or API. So there is this SDL app store where people can go to today, and I believe there is a couple of hundred apps already out there with developers from this industry writing codes to extend that functionality. We’ve recently announced the same for managed translation, so I believe there is a lot of potential in this API and SDK world.

One of the big to dos we have as a company is unifying all of these initiatives that we’ve driven and eventually come up with what I like to fantasize about, which is the SDL API or SDL SDK, where you can through one single API address most of the products if not all of them; but I think that’s still going to take us a while to get to, but fully behind that vision because, to be honest, this is how the rest of the software and services industries where I’ve worked for the past 20 years have created a lot of value, and there is no reason why it can’t or shouldn’t be the same in the localization industry.

Michael

Exactly, yeah. And we’ve been spending a lot of our conversation talking about technology. It is the exciting place and something that we all interface with. In your day to day job, Adolfo, do you spend more time on the technology side of SDL or the services side?

Adolfo

My job is very varied as such, so there are weeks where I spend more time with the technology guys, with the software guys and on the multiple products that we have. There are weeks where all I’m doing is services, and it’s services contracts that we are delivering to customers, that we need to try to improve, or new contracts that we’re trying to win. So, there isn’t such a thing as a percentage. But the way I look at this, it’s like in real life. I’ve got two daughters, I love them both; they are both different, and I need both of them to have a happy family. And SDL is the same. We’ve got a very successful £100 million software business; we’ve got a bigger services business that we’re trying to move to be more tech-enabled, but they’re both highly relevant, and they both take a lot of my time, and a lot of my executive time.

Michael

I have three daughters, and I joke with them regularly. I say, “I love you all equally, but on any particular day, one of you is my favorite!”

Adolfo

I couldn’t agree more with that.

Renato

One last thing… there is a lot of activity in our industry when it comes to M&A, lots of interesting companies in the market. Do you have, does the board of SDL ask you to have an M&A strategy, or are you focusing on growing organically?

Adolfo

Both. I think any CEO has to have both an organic strategy, and it has to have an inorganic strategy because you need to pursue both avenues to create shareholder value. That said, we came out, and this was a public thing, we came out with a three-year transformation plan for the company where we made some commitments on what we wanted to do organically in ‘16, ‘17 and ’18, and to do that it’s purely organic. We don’t need any inorganic M&A activity. But inorganic M&A activity and good opportunities are not always opportune, so sometimes they come your way when you are not looking for them. Sometimes when you’re looking for them, they don’t come your way.

So, we play our cards very close to our chest. We’re looking at what’s happening in the marketplace. We’re just trying to make sense of it all, get a sense of what assets could help us accelerate that strategy, and if and when an opportunity will be interesting, we will bring it to the board for discussion, but I don’t think I’m describing anything overly sexy. This is how a well-functioning, normal company and board should be run.

Michael

So Adopho Hernandez of SDL shared his journey with us as CEO. We heard about the technology landscape, his vision for the future of the company, and their intentional focus on organic growth, instead of M&A.

Renato

So for a few years it felt like SDL was losing momentum in the localization space as it focused on other services around customer experience, but Adolfo is bringing it back with vigor. I’m particularly curious about the in-house translator approach, which has fallen out of grace many, many years ago. But history repeats itself and new lessons are always learned. So there’s an opportunity here.

Michael

Yea. And Renato you mentioned that SDL, in your question, that SDL was the company that people love to hate, and with strong competition these days from Kilgray, Memsource, XTM, just to name a few that perhaps that hate that was so focused on SDL alone now has been distributed among other players.

Renato

In the end, it all comes down to the quality of customer support for all the players in this space.

Adolfo Hernandez started as CEO of SDL in April 2016. Since then he has been working with the board on a deep root and branch transformation of SDL to focus the company on helping global enterprises create, manage, translate and distribute content globally. Prior to SDL, Adolfo was CEO of Acision, the mobile messaging market leader, where his drive helped turn the company around prior to its merger with Comverse to form Xura/Mavenir.

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